Analysis: A new oil shock is building. The next few weeks of war will be decisive for the economy.

• Oil supply losses currently stand at 4.5-5 million barrels per day (5% of global supply) but are projected to double by mid-April when strategic petroleum reserve releases and sanction exemptions expire
• Physical oil prices show much steeper increases than futures markets: Dubai crude is up 76% since late February versus Brent futures up 36%, with LNG prices in Asia up 48%
• Even after the strait reopens, Middle East producers estimate it could take 3-4 months to return to full production due to shut-in wells and storage constraints

Summary: Oil Shock Threatens Global Economy as Strait of Hormuz Crisis Deepens

Key Situation: Iran's closure of the Strait of Hormuz—through which 20% of global oil supply normally flows—threatens to trigger a severe oil shock if not reopened within one to three weeks (by mid-April). The conflict has caused shipping through the strategic waterway to halt completely.

Market Impact:

• Brent crude futures up 36% since February 27, trading above $113/barrel (through March 27)
• Dubai physical delivery prices up 76% to $126/barrel, showing significant premium over paper prices
• Japan/South Korea LNG prices up 48%
• S&P 500 fell 3.4% from Wednesday through Friday
• 10-year Treasury yield rose to 4.4%, up 0.5 points during the conflict

Supply Disruption: Currently 4.5-5 million barrels per day (roughly 5% of global supply) are offline. Analysts warn this could double by mid-April, becoming the largest crude supply loss on record.

Stopgap Measures: The U.S. and allies are releasing 400 million barrels from strategic petroleum reserves (largest release ever) and temporarily lifted sanctions on Russian and Iranian oil. However, these measures will lose effectiveness in early-to-mid April.

Industry Concerns: Shell and other major oil executives at S&P Global's CERAWeek warned that even after reopening, Kuwait Petroleum estimates 3-4 months needed to restore full production due to shut-in wells.

Administration Response: The White House maintains optimism that military strategy will resolve the crisis soon, with thousands of new troops deployed to the region. President Trump's ability to influence markets through rhetoric appears diminishing as physical supply realities dominate.